What’s Going On With PLUG?

For investors paying attention, 2014 hasn’t been the start many have hoped for. We’ve watched the DJIA fall from 16,500 to just 15,800. That’s a loss of 700 points, or roughly 3%.

Obviously, there’s nothing much to talk about when looking at a 3% move over the course of January. It takes a 10% pullback to even be called a correction.

But when looking at Plug Power (PLUG), you’re probably curious about what’s going on. This alternative energy penny stock has fallen more than 46% from its 52-week high! PLUG rallied to $4.90 on January 9th… just 13 trading days ago.

Now, I don’t care who you are, but a 46% collapse is massive. But in 13 trading days… what’s going on?

Before I get to that, let’s make sure you know a bit about the company and why it’s been in the news…

PLUG – Plug Power

Plug Power is an alternative energy technology company that designs, develops, and manufactures fuel cell systems for industrial markets (think forklift and other material handing vehicles).

The company is doing a great job growing their customer base which includes some household names you’ll recognize. Here are just a few of PLUG’s customers-

Whole Foods

Firestone

FedEx

Mercedes Benz

Lowe’s Home Improvement

Walmart

Stihl

P&G

Coca-Cola

Sysco

Ace Hardware

BMW

Kroger

Wegmans

Now, let’s take a look at the chart for this extremely volatile penny stock to see what’s going on…

Looking at this chart, you’d think there’s been a negative announcement or an earnings miss. But to the contrary, the latest company news is all positive.

In my last article, I informed you that Plug Power reported Q4 sales totaling $32 million. Since then, we’ve also learned that PLUG completed their recent equity offering taking in $28 million! Here’s the excerpt from the filing I’d like you to focus on-

“The shares and the warrants were sold together in a fixed combination, with each combination consisting of one share of common stock and 0.40 of a warrant to purchase one share of common stock, at a price to the public of $3.00 per fixed combination for gross proceeds of $30.0 million. The securities were placed with a single investor.”

I’d say that’s a fair bit of conviction and a huge position for just one investor!

Since then, there have been plenty of commentary articles attempting to stifle the recent rally in PLUG shares, or help revive it. What’s interesting to note is none of these articles contains any hard evidence as to what the upcoming earnings report will tell us about the financial performance of PLUG. (aka- no one has a crystal ball)

It’s my belief that most of the selloff is due to short term profit-takers or fearful speculators bailing as the stock reverses. I only say that because the company has yet to release any real financial or product-product related news.

Interestingly, there’s a good chance the selling is due to a general slowdown in trading volume. Here’s the table of this year’s trading in PLUG:

The average volume over this period is just 37.6 million shares a day. As you can see, trading volume has been well below this average. Except for January 16th, every day since the 10thhas failed to meet or exceed this daily average.

Now, it’s a fairly well accepted belief that low volume tends to cause a stock price to float sideways, or drift minimally in either direction. But in the case of penny stocks, low volume can lead to the type of sell off we’ve seen- especially one this hotly debated among traders!

Since we’re absent company news or a fundamental catalyst, I’d recommend investors sit tight until we get the latest earnings report. That way, you can make an informed decision on how to proceed- long or short.

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About The Author

A.J cut his teeth while working for more than 12 years on the corporate side of the financial services industry in the suburbs of New York City. In addition, A.J. has successfully traded stocks, options and currencies as an independent trader since the late 90's.
Eventually A.J. moved out of the "rat race", landing in North Scottsdale, Arizona.
During the past few years, he's worked as the editor of a number of high profile financial newsletters. In this role, he's run trading services for penny stocks, options, currencies, ETFs, and FOREX. While under his direction, each of these trading services had turned in positive performance... something very rare in the financial newsletter industry.
In addition, he's been a regular contributor to a number of financial websites- writing under multiple pen names.
A.J.'s current goal is to share his real world experiences and success (and failures) in the various financial markets to help others not only make money- but avoid losing it.
It's this vision and passion that has led A.J. to launch pennystockreporting.com. Most of all, A.J. hopes to keep the little guy from getting caught up in the highly unscrupulous penny stock pump and dump scene.

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